Funding for financial technology (fintech) start-ups declined by 57 per cent in Q1 2024, compared to Q1 2023, according to a report by market intelligence platform Tracxn. Overall funding in Q1 of the current calendar year stood at $551 million, compared to $1.3 billion raised during the same period in FY23. However, the funding increased by 59 per cent compared to $346 million raised in Q4 2023.

The seed-stage and early-stage funding saw a massive decline. The seed-stage funding plummeted by 75 per cent to $9.9 million compared to $39.2 million in the previous quarter, while the early-stage funding saw a 35 per cent drop to $147 million in Q1 2024 from $227 million raised in Q4 2023. On a year-on-year basis, the funding started to plunge.

Only late-stage funding rounds witnessed a phenomenal rise of 392 per cent to $394 million, compared to $80.1 million in Q4 2023, according to Geo Quarterly India FinTech Report. India secured the third position globally in terms of funding raised for the fintech sector in Q1 2024, per the report.

Top performers and growth factor

The report highlights that the fintech sector witnessed significant growth in specific segments, with alternative lending, regulatory technology (regtech) and banking tech emerging as top performers in Q1 2024.

’Alternative Lending’ garnered almost 89 per cent of the total funding, clocking a growth of 290 per cent compared to $126 million raised in Q4 2023, reaching $491 million in funding.

Regtech, the second-highest funded sector, received funding of $107 million.

Banking tech, the third-highest funded sector, received $85.8 million in Q1 2024, which is a growth of 187 per cent compared to $29.9 million in funding witnessed in Q4 2023. This follows record-breaking UPI transactions and widespread adoption of digital banking with the rise of internet and mobile device penetration in cities and rural areas.

Also read: Indian start-up funding sees revival, VC investments double in Q1 2024

“We’re pleased to observe India’s fintech sector’s resilience amidst global economic shifts. Our Q1 2024 findings emphasise the sector’s innovative capabilities and its potential to drive India’s economic expansion. The sustained investor interest emphasises the importance of nurturing start-ups and R&D, aligning with the ‘Startup India’ initiative. This surge reflects the industry’s dynamism and innovation, positioning India as a leading global fintech player,” said Neha Singh, Co-Founder, Tracxn.

The quarter saw four acquisitions, a 43 per cent drop from seven acquisitions in Q4 2023. A notable acquisition was Difenz, a fraud risk management platform that was acquired by Signzy for $5 million.

Top investors

Medi Assist and IBL Finance went public in Q1 2024, showcasing the growing maturity of the Indian finech ecosystem.

Bengaluru emerged as the leader in total fintech funding during Q1 2024, followed closely by Mumbai and Hyderabad.

Peak XV Partners, Y Combinator and LetsVenture are the “all-time” leading investors in this space. Saison Capital, Hem Angels and Capital A led the seed investments in Q1 2024, while Peak XV Partners, RTP Global and Asha were prominent in early-stage investments. Elev8, Epiq Capital Advisors and UC-RNT Fund are the top investors actively involved in late-stage in Q1 2024.